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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
ORDER PER H.S. SIDHU, JM
The Assessee has filed the Appeal against the Order dated 18.2.2013 of the Ld. CIT(A)-XIII, New Delhi pertaining to assessment year 2005-06 and raised the following grounds:-
That the learned Commissioner of Income Tax (Appeals)
has grossly erred both in law and on facts in sustaining an assessment under section 143(3)/147 of the Act at an income of Rs.14, 44, 800/- as against returned loss of 55, 200/-.
2. That the learned Commissioner of Income Tax (Appeals)
has erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the Act and, further completion of assessment under section 143(3)/147 of the Act without satisfying the statutory pre-conditions for initiation of the proceedings and, completion of assessment under the Act.
3 That the learned Commissioner of Income Tax (Appeals) has further erred in law and on facts in sustaining the initiation of proceedings u/s 147 of the Act on the basis of information received from OIT (investigation) mechanically and without independent application of mind.
3.1 That further, the reasons recorded were mere reasons to suspect and were just to make fishing and roving enquiries, as no independent enquiry was conducted by the assessing officer before issuing such notice under section 148 and as such the proceeding initiated under section 148 was a mere pretence.
4. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in making an addition
Rs.15,00, 000/- as alleged accommodation entry received from Sh. SK Gupta, and held to be unexplained cash credit u/s. 68 of the Act.
4.1 That in doing so, the Ld. CIT(A) has completely ignored and overlooked all the necessary documents which were filed before both AO and CIT(A), explaining the fact that the appellant company has sold its shareholding in M/s Alliance Buildcon India
Ltd. to M/s Passion Chit Company Pvt. Ltd. which was duly reflected in the appellant company’s financial statements.
4.2 That further the learned Commissioner of learned Income
Tax (Appeals) ignored the basic fact that no amount was ever received from Sh. S.K. Gupta (the alleged accommodation entry operator), rather Rs. 15,00,000/- was received from MIs Passion
Chits Company Pvt. Ltd. and that too against sale of shareholding in MIs Alliance Buildcon India Ltd. and all necessary details regarding the said transactions were filed before learned ITO, which were totally ignored by the learned ITO without conducting any further enquiry, thus, addition so made by learned ITO and sustained by CIT (A) was clearly based on suspicions and surmises and is liable to be deleted as such.
5. That the Ld. CIT(A) has further erred in law and on facts by ignoring the fact that there could be no double taxation of the same sum once as sale consideration on sale of shares of M/s
Alliance Buildcon India Ltd. to M/s Passion Chits Company Private
Limited and again as undisclosed income received from M/s
Passion Chits Company Private Limited. This addition is in disregard of the judgment of Apex court in the case of Laxmipat
Singhania vs. CIT reported in 72 ITR 291 and therefore, unsustainable.
6 That the learned Commissioner of Income Tax (Appeals) has ignored the basic fact that the learned ITO solely based his order on statement made by Sh. D.N. Taneja on 07.01.2009 wherein he surrendered Rs. 6.23 crores, wherein he specifically surrendered Rs. 15,00, 000/- on behalf of appellant company, ignoring and overlooking the basic fact that Sh. D.N. Taneja was never a director in the appellant company and nor he had any shareholding in the appellant company, and thus, the surrender made by him on behalf of appellant company cannot be relied upon, as he is not aware of the facts of the appellant company.
7. That the learned Commissioner of Income Tax (Appeals) has further relied on a general statement of Sh. S.K.Gupta dated
05.01.2009, wherein no . where he mentioned that he has given accommodation entries to appellant company and no where he had mentioned that he has received cash in lieu of cheques issued by M/s Passion Chits Company Pvt. Ltd. to appellant company. His statement is general in nature and cannot be relied upon and addition made on his statement is totally based on irrelevant considerations, conjectures and surmises and as such is liable to be deleted as such.
8. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in making additions in the hands of assessee company, without giving any fair and proper
opportunity of being heard to the appellant company. Thereby, violating the principles of natural justice.
9. That the learned Commissioner of Income Tax (Appeals) has further erred by sustaining of levy of interest uls 234B of the Act,
which is not leviable on the facts of the appellant company.”
The brief facts of the case are that the assessee is engaged in the business of construction and development of properties. The assessee filed its return of income for AY 2005-06 on 30.11.2015 declaring a loss of Rs.55,200/-. Subsequently, information was received from the DCIT, Central Circle-18, New Delhi vide letter dated 18.2.2011 that the assessee company is beneficiary of accommodation entry and has received accommodation entries of Rs. 15 lacs vide entry dated 09.7.2014. This fact was admitted by Sh. SK Gupta during the survey proceedings carried out in his case by the Investigation Wing on 20.11.2007 in which he had admitted that the was providing accommodation entries to various persons through a number of concerns/ companies controlled by him. Her also confessed that various companies controlled by him do not have any business activities and are used only to issue accommodation entries. In view of the receipt of the above information the assessment was reopened u/s. 148 of the I.T. Act after recording reasons and notice was issued on 28.3.2011. In the assessment order passed by the AO the accommodation entry of Rs. 15 lacs received from Sh. SK Gupta has been added as unexplained income of the assessee and assessment was completed vide his order dated 23.12.2011 by assessing the income of the Assessee at Rs. 44,84,982/- u/s. 147/143(3) of the I.T. Act, 1961.
Against the assessment order, assessee preferred an appeal before the Ld.CIT(A) who vide his impugned order dated 18.2.2013 has dismissed the appeal of the assessee.
Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.
At the time of hearing Ld. Counsel of the assessee has stated that although the assessee has raised so many grounds but he has only pressed the ground no. 2 i.e. legal ground which is squarely covered in favour of the assessee by the ITAT decision dated 09.01.2015 in the case of G&G Pharma India Limited vs. ITO passed in (AY 2003-04) in which the Judicial Member is the Author. He further stated that the above decision of the ITAT dated 09.01.2015 has been upheld by the Hon’ble Jurisdictional High Court in its Decision dated 08.10.2015 in ITA No. 545/2015 in the case of Pr. CIT-4 vs. G&G Pharma India Ltd. In this regard, he filed the copies of the aforesaid decisions before the Tribunal. In view of the above, he requested that by following the aforesaid precedents the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee.
On the contrary, Ld. DR relied upon the order passed by the authorities below and stated that the AO has properly recorded the reasons for reopening by due application of mind, hence, the appeal of the Assessee may be dismissed.
We have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case law cited by the assessee’s counsel on the issue in dispute. We are of the view, it is very much necessary to reproduce the reasons recorded by the AO before issue of Notice to the Assessee u/s. 148 of the I.T. Act, 1961 which is reproduced hereunder:-
"Information has been received from the Deputy Commissioner of Income tax (Central Circle-TS, New Delhi, vide letter F. No. DCIT/CC-18/2010-11/593 dated 18.02.2011, that the above named assessee company is the beneficiary of accommodation entries as per details given hereunder- Name of the assessee Amount of entry Date of entry Dynasty Housing & Land Development Private Limited 15,00,000 09.07.2004 In the above context, statements have been recorded by the Directorate of Income Tax Investigation (Wing), New Delhi of the entry provider Sh. SK Gupta during the course of survey proceedings on 5.1.2009 who have confessed in his statements given before the Wing, that he is engaged in the business of providing accommodation entries to the needy persons against commission received from them. The entry provider have confessed that : i) They give loans and advances and share application capital through cheques after receiving of cash from them and take a premium as those cheques. ( answer to question no 7) ii) That Taneja Group of Companies is one of the companies to whom accommodation entry has been provided. iii) Their main work is of providing accommodation entries. iv) They provides entry to any person/firm/company against cash received from the concerned person/firm/company which is deposited by him in the various bank accounts operated by him through various persons, in various names, and against the cash so received, cheque/DD/or pay order is issued from the said accounts in the name of the party against commission. v) During the statement being recorded the Department had shown the print out of loan account obtained from the computer of Sh. S.K Gupta wherein at page number
925 there is clear account of Rs. 15,00,000/- as cheque given to the assessee company. Also in the account it is seen that cash has been received on various dates before this. vi) Also in the statement recorded of Sh. D. N. Taneja, the main controlling person of Taneja Group of Companies it has been accepted by him that the assessee company
'was its group company and that it has received entries on cash to cheques and has also offered it as tax on these receipts. vii) In view of the above facts, the surrounding circumstances prove itself the nature of entries and are sufficient reasons to make belief of the undersigned that the income to at least the above amount of Rs. 15,00,000/- has escaped assessment for A. Y.
2005-06.
In view of the totality of facts and circumstances brought out by the specific information provided by DIT (Inv.),
New Delhi, and also further supported by the circumstantial evidence that the entry operator is a professional name lender, I have reasons to believe that the assessee company has accepted accommodation entries which are of 'more than
Rs. 1 Lakh so as to-evade income tax on its real income for the concerned assessment years, which have escaped assessment within the meaning of section 147 of the Act.
The assessee has filed its return for A. Y. 2005-06 vide acknowledgement no. 582 on 21.11.2005 at a loss of Rs.
55,200/- and as per the records available the case has not been assessed u/s. 143(3) of the Act. In such eventuality approval vide provisions of section 149(1)(b) read with section 151(2) of the IT Act, 1961 is sought to issue notice U/S 148 of the Income Tax Act 1961 for the A. Y. 2005-06.”
After going through the reasons recorded by the AO, as aforesaid, we are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our considered view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law.
The AO has mechanically issued notice u/s. 148 of the I.T. Act, 1961 on the basis of information allegedly received by him from the Directorate of Income Tax (Inv.), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Our view is fully supported by the following judgment/decision:-
Pr. CIT vs. G&G Pharma India Ltd. in ITA No.
545/2015 dated 8.10.2015 of the Delhi High Court wherein the Hon’ble Court has adjudicated the issue as under:-
“12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries." The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case.
Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity .
In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises.
The appeal is dismissed.”
In view of above, we are of the considered view that the aforesaid issue in dispute is exactly the similar and identical to the issue involved in the present appeal and is squarely covered by the aforesaid decision of the Hon’ble High Court of Delhi in the case of G&G Pharma (Supra). Hence, respectfully following the above precedent in the case of Pr. CIT-4 vs. G&G Pharma India Ltd. (Supra) we decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings and allow the legal issue. Since we have already quashed the reassessment proceedings, as aforesaid, the other issues are not being dealt with being academic in nature.
In the result, Assessee’s appeal is allowed.
Order pronounced in Open Court on this 10-02-2017.